Pharmaceutical Innovation Under Attack

Instead of developing innovative therapies, pharma companies devote most of their resources to modifying existing medications, according to a report from the National Institute for Health Care Management Foundation (NIHCM). Industry responded by calling the report a "cheap shot" that ignores the fact that many so-called me-too medicines improve and save lives.

The report, "Changing Patterns of Pharmaceutical Innovation," claims that most new drugs are not new molecular entities (NMEs) with important therapeutic value, as defined by how FDA classifies new drug applications (NDAs) that merit "priority" versus standard review. Although the report acknowledges that pharmaceuticals and vaccines have revolutionized medicine in the last century, it also provides evidence that the high rate of innovation may be drying up.

The NIHCM paper analyzes 1,035 new drugs approved by FDA between 1989 and 2000 and finds that only 153 (15 percent) were "highly innovative"-priority rated NMEs. Most of the new drugs (65 percent) contain marketed active ingredients, which NIHCM classifies as "incrementally modified drugs" (IMDs). It's not surprising that most of the IMDs (85 percent) received FDA's standard review. But the agency did grant priority review status to a number of IMDs, which tends to support industry's claim that FDA's classifications aren't a true measure of product innovation. Many NMEs get a standard review because FDA's resources limit the number of applications it can process in a six month period. And it's a jump to say that all non-priority applications are for therapies that provide "no significant clinical improvement over existing products." The report notes that FDA approvals of priority status IMDs rose in the last five years, indicating that efforts to refine older drugs are providing real clinical improvements.

Not only are pharma companies investing time and resources in developing modified versions of older therapies, NIHCM claims, but they also are charging high prices for those products. New products that received standard FDA reviews were "the single most important driver" of increased retail spending on new medicines from 1995 to 2000, a period when prescription outlays more than doubled from $65 billion to $132 billion, the report states. Two-thirds of that increase ($44 billion) came from new drugs, and most of those were from what NIHCM considers less innovative products.

The report says pharma companies are shifting resources to "incremental drug development," because it's faster, less expensive, and less risky than developing brand-new therapies. The report also implies that manufacturers are taking the tack to foil generics competition, knowing that they can command high prices for new "line extensions" and gain patent protection without much work.

Rick Smith, vice-president of the Pharmaceutical Research and Manufacturers of America (PhRMA), criticized NIHCM for failing to look at all the new therapies in the pipeline. He claims that the industry spends about 80 percent of its $30 billion annual R&D budget on new product development and only 20 percent on research to improve or modify existing products. Smith also notes that "self-serving critiques" like the NICHM report may promote the interests of its supporting Blue Cross and Blue Shield organizations, but such actions provide few incentives for industry to discover new cures and life-saving medicines.